U.S. stocks snap four-week losing streak

Relatively light volume signals traders leaving NYC before storm

By

KateGibson

NEW YORK (MarketWatch) — U.S. stocks finished sharply higher on Friday, with Wall Street tallying its first winning week in five, after Federal Reserve Chairman Ben Bernanke signaled the economy is not in need of quick stimulus.

“He didn’t say anything negative, he just didn’t have anything too great to cause anyone to ramp up growth forecasts. We’re left with, ‘we think the U.S. economy is going to improve’,” said Ken Tower, senior analyst at Quantitative Analysis Service.

In his speech in Jackson Hole, Wyo., Bernanke said the Federal Open Market Committee would consider its options at its next meeting in late September. Read full story on Bernanke’s speech.

After falling more than 200 points, the Dow Jones Industrial Average
DJIA, -0.67%
climbed as much as 176 points, and finished with a gain of 134.72 points, or 1.2%, at 11,284.54. The index is up 4.3% for the week.

Settling with a weekly rise of 4.7%, the Standard & Poor’s 500 Index
SPX, -0.55%
rose 17.53 points, or 1.5%, to 1,1, with technology companies rising the most among its 10 industry groups.

The Nasdaq Composite Index
COMP, -0.22%
gained 60.22 points, or 2.5%, to 2,479.85, up 5.9% from the week-ago close.

“We’ve had a pretty good week and a very good day,” said Tower, adding that “we’re in a bottoming process, which is better than a straight down process.

“We still have this trouble brewing in Europe, that’s why we’re in a volatile funk.”

For every stock that fell, four gained on the New York Stock Exchange, where 1.1 million shares traded; composite volume neared a relatively light 4.3 billion, a possible indication that a good number of traders had departed the New York area before Hurricane Irene.

“There seemed to be a high amount of anxiety that he’d say something that was going to scare the markets, but right about when he started speaking, whatever the market was worried about seemed to go away,” said Randy Frederick, director of trading and derivatives at the Charles Schwab Center for Financial Research, pointing to the Chicago Board Options Exchange Volatility Index, or VIX
VIX, -2.82%
.

The index shot up just ahead of Bernanke’s address, “then fell off a cliff right after he got done,” said Frederick.

The VIX ended rose as high as 43.84 during the session, and ended down 4.14 points, or 10%, at 35.62.

For three solid weeks the VIX was at very elevated levels, indicating many more people thought it would rise rather than fall, with the open interest put-call ratio on the VIX was at its highest level at Thursday’s close since the Japanese earthquake in March, Frederick noted.

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